Can A Debtor Get Approved To Buy A Home While In A Chapter 13 Bankruptcy?

Can A Debtor In An Active Chapter 13 Qualify For a Home Loan?

Yes, it is quite possible for a debtor in an active Chapter 13 case to obtain a home loan.  Here is a link to an article that discusses how and when a debtor might qualify for a home loan following a Chapter 13 (and Chapter 7 bankruptcy).   Typically, a debtor in Chapter 13 must obtain bankruptcy court approval prior to obtaining a home loan.   The reason for this is that a debtor has committed to a Chapter 13 Plan that provides for payment of certain debts in certain amounts.   Incurring a mortgage (or any larger debt) must be reviewed by the court to make sure that the new mortgage debt will not adversely impact the current plan.  If a new home loan would not adversely impact a Chapter 13 case (e.g. not cause a debtor a financial hardship and inability to make the full plan payment), the the court will, generally, approve the new loan.

How Can A Debtor Obtain Bankruptcy Court Loan Approval?

In order to approve a request to incur a debt, the court must be provided all the relevant information for the proposed loan. Debtor’s counsel will typically need answers to the following questions:

  • What is the purchase price of the home?
  • How much is the requested loan?
  • How much down payment is required, if any?
  • What is the source of the down payment, if any?
  • What is the projected monthly “PITI” mortgage payment (include taxes and insurance)?
  • What is the loan interest rate?  Fixed or adjustable?
  • What is the term of the mortgage?  30 years?
  • Do you have an estimated HUD -1 Settlement Statement showing the terms?  (We need it.)

Once this information is available, a Debtor will sign a declaration that sets out the request.  The  Motion and declaration will then be mailed to creditors and filed with the court for hearing.  Typically, the hearing will occur no sooner than about 30 days from the date of the filing of the motion.  BUT, the time period and time it may take to obtain a court order approving the loan varies, i.e., it could take longere than 30 days.  Transaction closing should be set out far enough to allow the court time to have all the information it needs provided.

What If The New Loan Would Impact The Plan?

If approving the loan would negatively impact the plan, then that impact will have to be dealt with before the loan can be approved.  This normally means that a debtor would have to file a motion to modify the existing plan to make the controlling/current plan consistent with the facts of the new loan.

EXAMPLE:  If the mortgage payment would be higher than your current rent expense AND the projected housing expense increase would mean you have less to pay to creditors, then that impact would have to be approved by the court.  A debtor would have to file a motion to modify the plan (in addition to the motion to approve the loan) to reduce the dividend/payments to creditors.  There is no guarantee that the new loan would be approved if it means less for creditors.   However, if you are adding a member to your family and you reasonably need a larger place, then the new loan might be approved.

Contact Your Attorney Early In The Process

If you have been qualified for a home loan and want to buy a home, you almost certainly need court approval to incur the debt.  The prospective lender will also need to see the court order that authorizes you to incur the debt.  It takes anywhere from 30-60 days, in most cases, to obtain approval to incur mortgage debt.  Therefore, do not delay in making contact with your attorney to make sure you have everything in place to better increase your chances for a smooth transaction.




  1. connie smith says:

    I live in ma5ryland me and my husband is separated but we are in a bankrupt together, and the house we’ have in Georgia is in his name only… and I want to buy a new house when I return back to ga, can I do that

    • I presume you are in a 13 bankruptcy together. If so, you likely need to get court approval to borrow money to buy a home. Also, you need to find a lender experienced with loans made to debtors in an active Chapter 13.

  2. Connie Van says:

    How can you get courts approval if you don’t have a lawyer. We have already been approved to get a mortgage. The payments will be the same as our rent payment because we have lived here for 6 years. We have less than 10 months left for dismissal of our chapter 13.

    • You will either have to act as your own attorney and “jump through the hoops” (prepare and file the request) or hire one, I suspect. You might also check with the 13 Trustee for their input.

    • I could (in theory) fix my own car without the assistance of a mechanic. However, I cannot because I do not have the special knowledge or training to be able to fix my car. So, if I want my car fixed, I ether have to learn how to fix it or hire a mechanic to fix it. So, if you get the point, will have to research what is required in your jurisdiction to get court/lender approval or hire someone to help you with that. What I can tell you is that you likely need both court approval and lender approval.

  3. marcus anderson says:

    we are currently in a chapter 13 and have 2 years left. We are in Nashville, TN and we have never missed a payment while in the chapter 13. Do you know of any lenders in Nashville and what are our steps to start the process of buying a home. We’ve been with same bank for 10 years.

    • I’m sorry, but I do not know of any lenders specific to your area. As I have told another, a Google search and calls to local mortgage brokers would be your best bet. I’d love to hear back from you on your experience in getting approved for a home loan if you want to provide an update. I hope this helps!

  4. Terry Bauman says:

    We have just made our last payment on a chapter 13 bankruptcy in KS. It has not been discharged. Do we still have time to appeal to the court for permission to obtain a mortgage? As I understand once discharged we would have to wait 2 years to buy a house.

    • Well, you only need permission from the court while your 13 is up and running. So, you might as well just wait to close on a loan for a home until after your 13 completes soon. You can ask for permission now, but it sounds like it might be a waste of money to get permission to borrow money while in the 13 and then have the 13 complete (and you not needing the court permission you just paid to obtain). Make sense?

  5. My credit scores and balance s have not updated since i filled chapter 13. How do you get approved for a home loan with. Credit scores froze low????

  6. I am almost done paying on my chapter 13 Bankrupcy I will be finished in January 2019 how can I get a mortgage loan Iam on social security

  7. My husband and i are trying to get approved for a home loan in TN . We sent our letter to our lawyer . 4 weeks later they call to say they noticed we make 1000 more than we did when we filed 2.5 years ago. The raise was never reported as we did not know we had too. We was told we could get approved and our monthly payments to the trustee could go up or we can get denied and our monthly payment will still go up. How can this happen? I would think the trustee would be happy to approve if we should we could make our payments and we are trying to better ourselves.

    • Normally, a debtor has a duty to inform the Trustee (through your attorney and after advice provided) of any significant changes in your income/expenses. That requirement may be found in your plan, the order approving/confirming your plan, 11 USC 521(f)(4) and so on. So, I am guess that it was written down someplace and you just missed it. It happens. Failure to notify the trustee of a significant increase in income can be a problem. The ‘big idea’ is that you have to try your best to pay as much debt as reasonably possible in Chapter 13. If your net/disposable income went up, then maybe you could have paid more into the plan and paid more of your debt. Failure to notify the trustee of the income increase could lead to a motion to dismiss your case. Such errors can often be fixed. But, you need to discuss this with your attorney right away. If you sort it out, you might still be able to be approved for a home loan. Good luck!

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